Lascelles deMercado and Company half a year later is feeling both the effects of Carreras' more than 50 per cent decline in value, and the broader financial fallout, forcing a write-down of assets.
The spirit conglomerate says it has taken a hit from both ends of the spectrum - the debt and equities markets - and has repriced the fair value of its investments as a result, stripping $3.5 billion from its portfolio in the process.
At March 2009, Lascelles' financial assets had fallen to $7.2 billion, from $10.5 billion a year before. Carreras accounted for more than three-quarters of the decline.
Reduction in market value
"The $3.5 billion, representing a reduction in the fair value of investments at March 31, relates to the reduction in the market value of equities and Government of Jamaica global bonds held by our group," said group financial officer Janene Shaw.
"The change in the fair value of Carreras Limited's shares accounted for over $2.7 billion of the total," Shaw said in response to Wednesday Business queries.
GOJ bond prices have been staging a recovery but only two continue to trade above US$100, while the bids on two remain below US$70 (see Market Reports on Page 4C for snapshot of bond prices for Tuesday).
Lascelles owns the second-largest block of shares in Carreras with 15.3 per cent of the tobacco distributor's stock, or 74.26 million of 485.44 million issued shares.
The spirit conglomerate's decision to write off the $2.7 billion to reflect the price that would more likely be fetched in an arm's length transaction, came at the stock's lowest point, but Lascelles has signalled it is not giving up on the investment.
"The group continues to hold a significant investment in Carreras Limited, whose share price decreased from $72.10 in September 2008 to $36 in March 2009," said Shaw.
Since then, Carreras has regained some of its market value, though by only a fraction.
$21-billion loss
The stock in the past year has traded as high as $87, but was selling at about $72 to $73 when the September crisis hit. By the end of December, it hit a low of $35, slicing its market capitalisation from $42 billion to $17 billion - a $21 billion loss of investor wealth.
At the end of May, however, notwithstanding the added tax on cigarette sales and Carreras decrying illicit competition from black-market products, the stock was trading higher calendar year to date, at $40.43 - regaining $2.6 billion of its market value or the equivalent of the value that Lascelles has written off.
Partially compensating for the loss is the dividend declared by Carreras, of $4 per share paid March 17 and another $3 per share payable on June 25.
The distributions for this year alone would, at month end, have amounted to $3.4 billion, out of which Lascelles by virtue of its 15.3 per cent ownership would have collected $519.8 million.
business@gleanerjm.com